10 Money Tips You Should NOT Follow ...

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10 Money Tips You Should NOT Follow ...
10 Money Tips You Should NOT Follow ...

Even if it is well intended, there is just some money advice to avoid. It can even come from so called experts. The economic crisis has brought all kinds of people out of the woodwork who think that because they’ve had a ‘financial experience’, they are qualified to pass on money advice tips. Bad financial tips to ignore can come at you from all directions so here are some pieces of money advice to avoid.

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1

Using a Debt Service Company

The lure of debt consolidators and debt settlers is ever-present for those in trouble, but you should only use them if you have a lump sum to provide as a settlement for delinquency, otherwise deal with the creditors directly.

2

Keeping a Credit Card Balance to Improve Your Credit Score

Carrying a credit card balance each month and paying only the minimum payment is not an auspicious thing to do, and is definitely a piece of money advice to avoid. It is true that you must use your credit card on a regular basis for fresh activity on your credit report, but this does not mean you have to constantly have a balance. It is always better to clear your balance when you are able, and to keep your balance as close to zero as you can.

3

Paying off Debt with Home Equity

If you have debt like credit card or medical insurance, it might be tempting to take out a home equity loan. Not only can this compound your debt if you are not careful, securing unsecured debt can lead to you losing your home. This is financial advice to avoid like the plague.

4

Borrowing the Biggest Student Loan

Most students don’t think about their student loans when they head to university, but many follow a common bad money tip best avoided, which is to take out the biggest loan possible. The right advice is to calculate your exact tuition fees and living expenses first, and then choose the minimum loan amount for your needs. You can take out loans to cover your living expenses, but this doesn’t mean that you should if you can avoid it.

5

Terminating Unused Credit Accounts

A common misconception is that it is detrimental to your credit score to have unused credit cards, leading to common money advice to avoid such as terminating all of your unused account. This is not the case, and in-fact, the situation is almost the opposite. It is positive for your credit score to have lines of credit that you do not use, as this shows that you have restraint and are financially responsible. For the best effect on your credit score, any such unused credit should be used every so often.

6

Halting Your Mortgage Payments

It is thought that defaulting your mortgage is good because it leads to quick modifications. But your credit score will drop like a stone, and you will incur costly fees. Any suggestions that could put your home at risk are money tips to ignore.

7

Listing to Your Friends for Financial Advice

The fact is, unless you are lucky, your friends are probably not financial experts. Even if you do have a friend in finance, it is not a good idea to take financial advice, financial expert or not, because all financial investments are risky. Friendships come with emotions attached, and emotions get in the way of logic.

8

Buying Things with Monthly Payments

It is always nicer to hear ‘$240 a month’ rather than ‘$10,000 in total’, and the problem is, the salespeople know it. Most of us can’t buy outright for big purchases, and the interest involved is a necessary fact of life. The real issue however is not thinking about the total cost you will have to pay in favor of looking at the monthly cost only. Take a step back and understand exactly what the purchase will cost you in the long run.

9

Using Your 401(k) for Bills

Going for retirement savings or the 401(k,b) is an oft-confided suggestion for paying your dues. This is financial advice to ignore unless you have exhausted all and everything, even bankruptcy.

10

Simply Paying when You Can

Don’t think that just paying any arbitrary amount on a debt, especially low amounts, is good enough to bequeath confidence on the creditor’s behalf and disarm their debt recovery procedures. Making such payments is a piece of money advice to avoid; the real solution is to contact the creditor and arrange a formal repayment plan.

It’s really important that when you choose to follow any financial advice you are completely aware of the position it will put you in, and the worst case scenario it puts you at risk of. If you’re not sure what money advice to avoid, consult a professional.

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